There is perhaps a slightly less positive aspect in the tropical timber market place than that expressed in our Asian report at the beginning of the year.

Producers generally have had a good run with a steady though moderate upwards price trend that seems in some areas to have now slowed to a halt.

Prices remain stable, very much backed up by the ever-tighter log supply in the Asia-Pacific region resulting in high log prices.

There is little doubt that the effects of the joint efforts of governments and industry in Vietnam, Indonesia and Malaysia to put in place a VPA (voluntary partnership agreement) or local equivalent is leading to a more regularised, sustainable availability of logs. And in Malaysia there is now said to be a shortage of raw material for the timber processors and, in addition, a reported shortage of labour.

Malaysian sawmillers have long depended on temporary, seasonal workers from neighbouring countries and, possibly, as these develop their own timber industries, this experienced workforce may have less incentive to travel.

The Malaysian government anti-corruption agency is to investigate illegal activities leading to deforestation, advising that it will first look into illegal land clearance, bauxite mining and unlicensed factories, before looking into the timber industries.

ITTO Developments

ITTO, the International Tropical Timber Organisation, which is based in Yokohama in Japan, has appointed a new executive director, Dr Gerhard Dieterle. Last year the organisation weathered a difficult financial situation and Dr Dieterle has forestry and economics qualifications and long experience – and not only in forestry matters. He is also working with prestigious entities such as the World Bank and has stated strong support for ITTO’s initiatives on Sustainable Forest Management (SFM).

He has also made it clear that sustainable forest management means that forests are valued resources, which the timber trade may perhaps take to imply that their role in harvesting and processing should be recognised as a positive partner in SFM by releasing some of that value rather than being cast always as villains who are indiscriminately chopping down trees.

ITTO is the partner with EU in the implementation of the FLEGT Independent Market Monitoring IMM project and is currently calling for comments.

The FLEGT report on the project, its aims and objectives is accessible on the ITTO website.

So far, Indonesia is the only country licensed to supply FLEGT timber products and a recent EU/FLEGT IMM meeting noted that progress towards full qualification by other producer countries has been slower than hoped for.

An Indonesian delegate to a recent Chatham House meeting has called for emphasis on informing consumers throughout the supply chain about FLEGT licensed timber and its compliance with EUTR.

China Timber Demand

China is the driver of timber trading in the Asia-Pacific region and has recently announced a project called the Belt and Road Initiative (BRI).

The infrastructure project, which has been estimated to be worth US$900bn, appears to be a policy to encourage trade to be aimed more strongly inwards towards Asia and the Middle East markets.

China could spend US$150bn on projects annually, as it seeks to create a new ‘Silk Road’.

Malaysian authorities have already stepped up formal contacts with China and it has to be remembered that Malaysia exports palm oil worth some three times more annual value than timber.

In the first half of the year China bought 16% more sawn lumber than in the same period of 2016 at higher average prices. For tropical timber the rise was almost 15% with an average price increase of around the same percentage.

Perhaps a surprise to many observers is that Thailand supplies China with almost three quarters of the total import volume of tropical sawnwood, close to 3 million m3.

The United States is the second largest supplier of sawn hardwood to China and, here too, prices were considerably higher than in 2016.

Plywood Markets

The plywood markets have seen some significant adjustments through the first six months, not least being what seems to be a reversal in market sentiment in Japan.

Earlier, the Japanese plywood trade was reported as depressed, battered, it was said, by adverse currency movements, low demand and the volatile, unpredictable price of imported logs.

This scenario has changed, partly because of the tightening in the availability of what are called South Sea logs and their subsequent higher prices and, more substantially, because Japan’s plywood mills have turned to a greater use of local logs.

In recent years there has also been a gradual change in consumer acceptance from policies that had previously always insisted on tropical hardwood plywood and they are now much more willing to use local species and composites.

Apart from being a major importer of timber and timber products, Japan is also an exporter, with annual sales up to around 500,000m3 of logs. It also sells sawn lumber to buyers in the Philippines.

Malaysian and Indonesian plywood sales to Japan are down but there is some consolation as their plywood sales to the US have increased, possibly as a result of a heavy fall in US imports of Chinese ply caused by the anti-dumping duties imposed early this year.

US industries have no compunction in calling for protection from imported goods if they believe and can demonstrate that there is unfair price competition. US housebuilding activity has continued to improve, but imports of tropical sawnwood are still low. Furniture imports are said to be better.

Markets in the Middle East are very active with stable prices for both Asian and African imports and, as conflicts in the region recede and authorities begin to consider a start to rebuilding towns, cities and infrastructure, there will be a need for very large volumes of timber products.

Syria has already begun to seek contractors capable of tendering for large projects. Elsewhere, business with South Africa is depressed as a result of the uncertain political situation and lack of public infrastructure investment.

In contrast, Asian inter-country business within the Asia-Pacific region is good and prices firm, with much, as always, depending on trade with China.

Some West African exporters feel that timber stocks in China are on the high side and some African log prices look marginally weaker.

This year’s hike in prices and volume have most likely peaked but South Sea logs are likely to hold at current levels as supply is limited.

Business with Europe is described as dull and the gradual annual fall in the volume of tropical timber imports appears to have resumed in spite of initiatives to try to stimulate the trade.

The long and sustained campaigns against use of tropical timbers coupled with stringent import regulations are a deterrent, in particular for smaller exporters wishing to gain market access.

The overall market picture looks stable, with perhaps a pause in the earlier upwards trend lines for volume and price.